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Understanding a Credit Report Score

Most people understand that they have a credit report, and that report helps lenders choose who they want to make loans to and what kind of interest rate they want to offer to those people. These same people realize that their credit report contains all kinds of information about who has given them credit in the past, how much credit they received, and other factors. However, they might not realize that most lenders don’t really look at all of those things. Instead, they look at the credit report score, or FICO score, and that score comes from several different things. It’s not just about who lent you money and  whether you paid it back on time, although that’s a large part of it, but there are other factors that go into your score.

What Else Makes Up a FICO score?

Your credit report score is also made up of what kind of credit you have, how long you’ve had credit, and how much of your available credit you’re actually using. If you have credit cards that are maxed out, your credit score will be lower than someone with the same set of circumstances but paid off credit cards. If  you keep your credit card balances under 30% of what you can borrow, the credit score will rise. Also, don’t close out those credit card accounts that you don’t use anymore. Closing them can hurt your score, because you don’t have as much available credit that way. Rather than risk that, just leave them open. If you decide to close them, do it one at a time, and make sure you don’t carry high balances on the credit cards that you’re still using and planning to leave open.

How to Raise Your FICO Score

If you’re worried about the credit report score that you have, you can raise it by doing some of the following things:

  • Pay your bills on time, each and every time.
  • Don’t borrow as much as your credit lines will allow.
  • If you have a credit problem, work to get it straightened out right away – don’t just ignore it and hope that your lender will fix it for you, because that won’t happen.
  • Don’t co-sign any loans unless you’re certain the person you’re co-signing for will pay the loan (or you’re prepared to make the payments if that person defaults).
  • Leave credit accounts open, because closing them can hurt your score.
  • Get a copy of your credit report every year and make sure that there aren’t any errors on it. If you find problems, call the credit bureau right away.

If you pay attention to how you use your credit, your credit report score will stay high and you’ll be able to get a loan when you need it – and at a good interest rate, too. Make sure you’re doing your part by paying your bills on time. Then, leave your credit lines open when they’re paid off. Also make sure you’re using different types of credit and keep those credit card balances low.

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